in the short run the firm expects to become profitable again in future, when the price of its product increases or the cost of production falls. operating at loss might be painful, but it will keep open the prospect of better times in the future. moreover, by staying business. the firm retains the flexibility to change the amount of capital that it uses and thereby reduce its average total cost
Losses occur when revenues do not cover total costs. Revenues could be greater than variable costs, but not total costs, in which case the firm is better off producing in the short run rather than shutting down, even though they are incurring a loss. The firm should compare the level of loss with no production to the level of loss with positive production, and pick the option which results in the smallest loss. In the short run, losses will be minimized as long as the firm covers its variable costs. In the long run, all costs are variable, and thus, all costs must be covered if the firm is to remain in business.
in my opinion if the firm occur losses, they will be have so many loss if their shut down their firm, the best solution is a firm still running but with a very small budget and maybe get a help from another firm to save the firm of yours, but you must concern too about the market right now, and or maybe you can invest the firm with very low price
Losses occur when revenues do not cover total costs. If revenues are greater than variable costs, but not total costs, the firm is better off producing in the short run rather than shutting down, even though it is incurring a loss. The reason is that the firm will be stuck will all its fixed cost and have no revenue if it shuts down, so its loss will equal its fixed cost. If it continues to produce, however, and revenue is greater than variable costs, the firm can pay for some of its fixed cost, so its loss is less than it would be if it shut down. In the long run, all costs are variable, and thus all costs must be covered if the firm is to remain in business.
in the short run the firm expects to become profitable again in future, when the price of its product increases or the cost of production falls. operating at loss might be painful, but it will keep open the prospect of better times in the future. moreover, by staying business. the firm retains the flexibility to change the amount of capital that it uses and thereby reduce its average total cost
ReplyDeleteLosses occur when revenues do not cover total costs. Revenues could be greater than variable costs, but not total costs, in which case the firm is better off producing in the short run rather than shutting down, even though they are incurring a loss. The firm should compare the level of loss with no production to the level of loss with positive production, and pick the option which results in the smallest loss. In the short run, losses will be minimized as long as the firm covers its variable costs. In the long run, all costs are variable, and thus, all costs must be covered if the firm is to remain in business.
ReplyDeletein my opinion if the firm occur losses, they will be have so many loss if their shut down their firm, the best solution is a firm still running but with a very small budget and maybe get a help from another firm to save the firm of yours, but you must concern too about the market right now, and or maybe you can invest the firm with very low price
ReplyDeleteGUIDELINES ANSWER:
ReplyDeleteLosses occur when revenues do not cover total costs. If revenues are greater than variable costs, but not total costs, the firm is better off producing in the short run rather than shutting down, even though it is incurring a loss. The reason is that the firm will be stuck will all its fixed cost and have no revenue if it shuts down, so its loss will equal its fixed cost. If it continues to produce, however, and revenue is greater than variable costs, the firm can pay for some of its fixed cost, so its loss is less than it would be if it shut down. In the long run, all costs are variable, and thus all costs must be covered if the firm is to remain in business.